Is Pharma back on growth track? Here's why Axis Securities is betting on Lupin, Cipla and Aurobindo Pharma

Many experts have maintained their bullish stance on the pharma sector after the companies reported a stellar set of numbers for the first quarter of this financial year (Q1FY24). In Q1FY24, the pharma companies under Axis Securities' coverage posted robust revenue growth on account of volume ramp-up, new launches (especially Revlimid), and stabilizing pricing pressure in the US base business.

Is Pharma Back on Growth Track?

According to Axis Securities, the margins will also improve as raw material and freight costs normalize, US price erosion eases, and a better mix is achieved. In the US business, supply constraints have led most business leaders to point to a sharp decline in price erosion, which is expected to remain low for the remainder of FY24, it said.

However, it added that the USFDA inspections remain an overhang and price erosion in the US is expected to increase once supplies normalize. It continues to eye on companies that are focused on launching niche products in the U.S. market and a strong product mix (Chronic Portfolio) in the Indian market.

Axis Securities is betting on Lupin, Cipla and Aurobindo Pharma with up to 19 per cent upside potential.

Lupin

Rating: Buy | Target Price: Rs 1,200 | Upside:  10%

Axis Securities noted that the sales of gSuperb, gAlbuterol, gLisinopril and the new launch of Darunivar continue to perform encouragingly in the US, while the base business is seeing low single-digit price erosion.

"We have confidence in Lupin’s business supported by new launches in the US market like Darunavir, Cynocobalamin, Diazepem Gel, Vereniciline, Bromfenac etc. excluding gSpirva, double-digit growth in India business as the company has already increased MR to 1,000 and an uptick in the API business as the API industry is witnessing demand revival," it added.

Cipla

Rating: Buy | Target Price: Rs 1,380 | Upside:  13%

The brokerage highlighted that the base U.S. business posted better-than-expected results. This was because a few distributors bought locally manufactured drugs, channel readjusting, drug shortages in some segments, and new product launches.

It added that gAdvair and gAbraxane could lead to additional revenue in FY25 despite current regulatory challenges. Also, gSynbicort is expected to launch in the fourth quarter of FY24, and the company plans to launch three more peptides next year.

Aurobindo Pharma

Rating: Buy | Target Price: Rs 1,000 | Upside:  19%

Axis Securities said that Aurobindo Pharm has several growth levers in place. These are:

1) Generic injectibles, Eugia, which could grow in low double-digits due to value-added approval

2) The launch of Trastzumab biosimilars in the second quarter of FY24

3) The launch of Pen–G injectible in the first quarter of FY25

4) One-time opportunity in gRevlimid in the next 2-3 years

 

Disclaimer: The stocks mentioned in the story are for information purposes only. Investors or market participants should consult their financial advisors before taking any position.

 

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